No! Putting a child’s name on any asset of yours opens up your money to your children’s creditors.
Many people add their children’s names as owners to their checking and savings accounts, CDs, investment accounts, stocks, bonds and real estate. They are thinking to themselves that if I get sick or if I’m in the hospital, then my child can pay my bills for me. But what most people don’t know is that the Supreme Court of Arkansas has ruled that your children’s creditors can come after your money.
Could your children have any creditors? You may have the most honest, respectful, loyal child who would never do anything against you and who is financially well off, but that doesn’t mean you can’t lose all your assets to their creditors. They could have hospital bills they can’t pay. They may get in a car wreck and be at fault, they could go bankrupt or more likely they could get a divorce. Your ex son-in-law could use your asset as leverage to get custody of your grandchildren in a bitter divorce with your daughter.
If I am the attorney for your child’s creditors, I know that it is common for parents to put a child’s name on their assets. In the very end, I might not get your money, but nobody is going to use the money until the lawsuit is over in two to three years. Your account will be locked down.
What are some safer ways to go about giving your child access to your accounts?
One of the best solutions is to set up a Revocable (Living) Trust. With a trust your child can become the trustee if you become physically or mentally incapacitated. You money is protected and a host of other problems are solved too. Some other options include making your child a “signatory” on the account. A signatory can access the account but they are not an owner, so their creditors can’t come after your money. Another option is to give a Durable Power of Attorney to your child. Your child will have access to the account but since they aren’t the owner, their creditors can’t get your money. Both the “signatory” and the Durable Power of Attorney, while cheaper to set up, come with their own potential problems.
Consider letting an experienced Estate Planning attorney review how your accounts are set up to see if there are any potential pitfalls and problems you may have in store for yourself.
Estate Planners of Arkansas, P.A. has prepared over 4,000 Estate Plans. Call 1-501-414-8965 for your FREE initial consultation today.